31 MAY 2013The Economic Times
Pricing pressure worries Hindalco
Edited by : AL CIRCLE
1 min read
The March-quarter results of India's largest aluminium producer, Hindalco were mainly inflated by higher other income and lower tax. While it reported a profit after tax of USD 85.88 million, its operating profit was actually down 26% year on year and shows no signs of revival.
Going ahead, the company's stock, which has underperformed the benchmark Sensex, is unlikely to do well unless aluminium prices recover or the company gets clearance for its captive coal blocks in Madhya Pradesh, which will help it improve its profitability.
Given the pricing pressure in the international markets, the company has given a flattish guidance for the operational performance at Novelis, its international subsidiary, which accounts for nearly two-thirds of the company's top line and half of its bottom line.
The company's financial performance in FY13 deteriorated over the previous year and the balance sheet weakened. As a result, its net debt-to-equity ratio rose to 1.4 from 1.1 a year ago.
This negative outlook is unlikely to attract investors. Besides, the valuation of the stock does not appear attractive. At the current market price of INR 110, it is trading at a slight premium to it global peers.
Going ahead, the company's stock, which has underperformed the benchmark Sensex, is unlikely to do well unless aluminium prices recover or the company gets clearance for its captive coal blocks in Madhya Pradesh, which will help it improve its profitability.
Given the pricing pressure in the international markets, the company has given a flattish guidance for the operational performance at Novelis, its international subsidiary, which accounts for nearly two-thirds of the company's top line and half of its bottom line.
The company's financial performance in FY13 deteriorated over the previous year and the balance sheet weakened. As a result, its net debt-to-equity ratio rose to 1.4 from 1.1 a year ago.
This negative outlook is unlikely to attract investors. Besides, the valuation of the stock does not appear attractive. At the current market price of INR 110, it is trading at a slight premium to it global peers.
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